Rethinking Environmental, Social, and Governance Metrics for the Mainstream Investor

Corporate sustainability reporting has begun to attract mainstream investor attention. While traditional socially responsible investors use Environment, Social, and Governance (ESG) performance metrics to exclude “bad actor” companies from their portfolios, the new interest comes from those who hope to match or beat market performance benchmarks. The prevailing wisdom suggests, however, that corporate sustainability leadership only rarely translates into marketplace success and recent studies to disprove this wisdom have not yet resulted in a compelling case. This article assesses the factors that underlie the evidence and challenges the conclusion that sustainability and market success are not linked. It explains that a clearer conceptual “sustainability” framework and an improved ESG metrics methodology would position mainstream investors to connect ESG scores to financial performance – sharpening the business world’s focus on sustainability.

Publication Date: 
November, 2017